With 2009 comes tax break, increase in minimum wage

Wednesday

Dec 31, 2008 at 12:01 AMDec 31, 2008 at 12:25 PM

Ohio workers, especially the lowest-paid, should take home a little more pay when the last piece of a 21 percent income-tax cut takes effect Thursday and the state's minimum wage rises by 30 cents an hour to $7.30.

Ohio workers, especially the lowest-paid, should take home a little more pay when the last piece of a 21 percent income-tax cut takes effect Thursday and the state's minimum wage rises by 30 cents an hour to $7.30.

But not everyone is happy about the changes.

Some say going ahead with the tax cut is a bad idea, with state government drowning in red ink. Others think that a bump in the minimum wage will lead to fewer jobs because of higher business costs.

"While some people may get a 30-cent increase, others will go to zero," said George Vredeveld, director of the Economics Center for Education and Research at the University of Cincinnati.

The tax cut was aimed at creating jobs. The 21 percent, across-the-board cut in personal income taxes was enacted in 2005 and was to be phased in over five years. The last piece is roughly a 4.2 percent cut.

Employers have been sent new tax tables and should adjust withholding in employees' first paycheck of the new year, said John Kohlstrand, a spokesman for the Ohio Department of Taxation.

Workers whose employers don't make the change right away shouldn't worry, Kohlstrand said. Those workers will get a larger refund in 2010 because their income-tax bill at the end of 2009 will be lower.

But with the state facing a possible $7.3 billion budget shortfall, critics say Ohio can't afford the estimated $450 million in forgone revenue from the tax cut in fiscal 2010, which starts July 1, and $468 million in fiscal 2011.

Zach Schiller of Policy Matters Ohio, a liberal-leaning research group, said that the cuts disproportionately favor the wealthy -- and that the state's economy, which continues to hemorrhage jobs, would be better served by maintaining current levels of government spending.

The tax department has calculated that the income-tax reduction in 2009 would save a family of four with income of $60,000 a year about $85, or $1.63 a week.

Republicans, who still control the Ohio Senate, remain solidly behind the tax cut and say the job situation would be worse without it. Outgoing House Speaker Jon Husted,

R-Kettering, even suggested recently that the cut could be considered an economic-stimulus package.

Democratic Gov. Ted Strickland has said he's trying to protect the tax cut because any increase in taxes now would be counterproductive.

Meanwhile, minimum-wage workers who put in 40 hours a week can expect $12 more in pay -- before taxes -- as a result of the 30-cent-per-hour boost.

In 2007, about 79,000 Ohio workers, or 4.6 percent, earned the minimum wage or less, including exceptions and exclusions, according to a survey from the U.S. Bureau of Labor Statistics.

Among Ohio's exceptions, workers who earn tips, such as waiters, will see a 15-cent-per-hour increase to $3.65.

Workers who are 14 or 15 years old, or work for companies with a payroll of less than $267,000, have a minimum wage of $6.55. The rate took effect last July and will rise to $7.25 in July 2009.

Ohio voters passed a constitutional amendment in 2006 that called for the increase. Supporters say it helps those who need it most while boosting the economy because the money typically is spent on necessities.

George Zeller, an economist who works for nonprofit groups in the Cleveland area, also said the increase was needed after years in which the real value of the minimum wage decreased because of inflation.